Business leaders discuss future of island manufacturing
By The Star Staff
The Puerto Rico Manufacturing Extension Inc. (PRiMEX), held a roundtable with business leaders Tuesday to discuss opportunities and how the manufacturing of the future should be built amid new trends.
Manufacturing has played a fundamental role in the economic evolution of Puerto Rico in the past six decades. Some recent data show its current importance. In 2019, the manufacturing sector was responsible for over 30% of revenues to the treasury, about $3 billion, of which the tax revenues under Act 154 were about $2 billion. The industry generated 74,000 direct jobs, with an average salary of $39,000, and generated about 136,000 indirect jobs.
Economist José J. Villamil, CEO of Estudios Técnicos, said manufacturing will continue to be a key sector in the island’s development, but it will be a very different manufacturing, in keeping with the global trends that are already underway. For instance, production of intangible goods will increase, blurring the dividing line between manufacturing and advanced services.
New manufacturing companies emerge around technologies, such as TESLA and many others, and this trend will not change. This is very important, Villamil said, because these new companies do not respond to the demand in the market but rather create it. Companies will be characterized by being highly mobile and by being located practically anywhere, which has allowed a greater dispersion of industrial production and has generated the movement for North American multinational companies to return to the U.S. territory.
The organization of production is fragmented and requires integration of processes carried out in companies located in different jurisdictions. Horizontal integration (“outsourcing” or subcontracting) replaces the vertical integration characteristic of traditional manufacturing.
“The very short useful life of products and technologies requires companies to have the flexibility to act with agility to face changes in technology,” Villamil said.
Economic Development and Commerce Secretary Manuel Cidre Miranda emphasized that Puerto Rico’s workforce is world-class in many sectors of the economy, such as medical devices, pharmaceuticals and aerospace, among others. He said the advancement of manufacturing should be in the hands of the private sector and rely less on government.
“Puerto Rico is among the best on the planet, not only because of its human resources, but also because of the stability and security of the financial and legal system, in large part because of the island’s relationship as a territory of the United States,” Cidre Miranda said. “However, we are aware that technology is changing and we need to adapt and create strategies to continue developing that workforce. Looking to the future, the Department of Economic Development and Commerce (DDEC) is committed to the economic and social development of Puerto Rico and is well aware of the relevance of the industry in this goal.”
Rodrick Miller, principal officer of Invest Puerto Rico, said that historically, manufacturing has been the axis of the island’s economic development.
“At InvestPR we are committed to the legacy of excellence in this sector to accelerate our economic transformation,” he said. “Through collaboration with organizations such as PRiMEX, we develop strategies, not only to attract advanced manufacturing to Puerto Rico, but also to strengthen the existing ecosystem through access to information, knowledge, and global market trends. The purpose of these efforts is to increase the island’s capacity to respond to emerging needs and changes, in addition to improving our competitiveness as an investment destination.”
PRiMEX Executive Director Ramón Vega Alejandro discussed the challenges and suggestions for small and medium-sized companies in the manufacturing area.
“After all the events on the island, hurricanes, earthquakes and pandemics, we will not return to the conditions prior to COVID-19, we are entering a new standard of doing business,” he said. “Taking this new reality into account, it is key that companies adapt and prepare with new skills to re-focus on how to develop human resource talent, strengthen their ability to trade online (e-commerce), invest in advanced technology and innovate in products, processes, services and business models. Effective leadership plays an important role in transforming companies with greater resilience for the future, creating a culture of innovation and adopting advanced technologies.”
Entrepreneur Bettina Mercado discussed the challenges faced by manufacturers, including the lack of supplies. Officials agree that it is up to the government to deal with interruptions in the supply chain prompted by the current dispute at the docks.